California Assembly Republicans
proposed stripping funds from child-development and mental-
health programs as well as cutting state employment costs by 10
percent to help close a $15.4 billion deficit.

The chamber’s minority party also would suspend a program
that pumps extra money into poorly performing schools as part of
$7.4 billion in cuts to help balance the most-populous state’s
budget without new taxes. The plan rolled out yesterday in
Sacramento also relies on revenue gains from existing levies.

The proposal offers the first detailed Republican road map
to bridging the gap. The party’s Assembly caucus said the cuts
and revenue gains would preserve funding for public schools and
colleges. The plan doesn’t rely on extending about $11 billion
in temporary taxes and fees sought by Governor Jerry Brown,
while it ends programs that help children and the ill.

“We don’t want to see the services that are making a huge
difference in our communities undercut,” Eduardo Vega, the
Mental Health Association of San Francisco’s executive director,
said yesterday in a telephone interview. Rolling back such aid
to early-1990s levels isn’t the way to go, he said.

Brown, a Democrat, plans to release a revised budget on May
16, according to a news advisory yesterday from his office.

Child Services

Under the Republican plan, funds earmarked for mental-
health services and early-childhood development would be drained
of $2.4 billion. In 1998, voters passed a 50-cent tax on packs
of cigarettes to pay for the child services. Six years later, a
1 percent income-tax surcharge on those earning $1 million or
more was passed to help pay for mental-health programs.

In 2009, voters blocked then-Governor Arnold Schwarzenegger
from using the two funds to close a deficit. That part of the
Republican plan would require public approval at the ballot box.

“People voted against redirecting this funding because
they didn’t want to see people with mental illnesses on the
streets or in jail,” Vega said. About half of his group’s
$800,000 annual budget comes from the fund targeted for
elimination.

A new vote is likely to produce a different result than in
2009, when the measures shared ballot space with proposals to
increase taxes and fees, Connie Conway, the Assembly’s
Republican leader, told reporters at a briefing in Sacramento.
“It’s all in how you bill it,” she said.

No Added Taxes

Conway wouldn’t say how Republicans would take $1.1 billion
out of state employment costs. Measures may include reducing
wages, unpaid time off or job cuts, she said.

“For once, we’re going to live within our means and not
kick the can down the road,” Conway said. “Our plan doesn’t
add to the tax burden.”

On March 29, Brown declared a failure in negotiations with
Republican lawmakers over extending taxes and fees set to end in
June. Brown needed at least four members of the minority party
to join fellow Democrats to put the issue before voters.

Last month, the 73-year-old governor said he may try to get
the extension on a November ballot, either by winning Republican
support or by bypassing the Legislature through a voter-petition
initiative. The deficit amounts to about 18 percent of Brown’s
proposed $84.6 billion general-fund budget. He and lawmakers
have already narrowed the gap by about $11 billion.

Surplus Funds

The Republican plan would produce a surplus of as much as
$800 million in fiscal 2012, depending on how much community
redevelopment funding is reduced, according to a financial
outline of the proposal. The extra revenue would be held in a
reserve account, the document shows.

Republicans have split on a Brown-backed proposal to
dissolve about 400 redevelopment agencies that employ tax
revenue to spur economic growth in blighted areas. Brown’s
budget proposal would erase the authorities and put much of the
money they use into schools.

Republicans “appear to have come to their senses” on the
development agencies, Gil Duran, a Brown spokesman, said in a
statement. Other parts of their plan are “the same old short-
term, smoke-and-mirrors approach to budgeting that got the state
into dire financial straits in the first place,” he said. “If
Republicans wanted to play a serious role in finding a budget
solution, they wouldn’t have waited until the middle of May.”

Bond Market

The Republican plan would forestall a long-term solution to
California’s financial strains, making it difficult for the
state to issue bonds, said Tom Dresslar, a spokesman for
Treasurer Bill Lockyer, a Democrat.

“The bond market would see this plan for what it is: more
fantasy budgeting, more fiscal mismanagement, and another blown
opportunity to get our financial act together,” Dresslar said
in an e-mailed statement. “Rating agencies would see that it’s
not responsibly balanced.”

Brown won election in November on a pledge to end recurring
deficits that have left California, whose economy is bigger than
Russia’s, with the lowest credit rating of any state from
Standard & Poor’s, at A-. The governor, whose two previous terms
ended in 1983, has said letting voters decide whether to retain
the temporary tax increases is crucial to closing the budget gap
without making deeper cuts to education and public safety.

Republicans have said that any referendum should also let
voters decide whether to replace current state pensions with a
plan that mixes traditional defined benefits with 401(k)-style
savings accounts.

Leaders of the Legislature’s minority party also want to
give voters a chance to cap state spending. The limit they’ve
suggested would be based on a formula tied to inflation and
population change. Republicans also have sought a referendum on
undoing environmental rules that hinder business growth.